Billionaire investor Warren Buffett’s holding company, Berkshire Hathaway, held its annual shareholders meeting (or shall I say, shareholders festival?) in Omaha last weekend. Buffett fielded tons of questions on a variety of topics from Bitcoin to health care to United States trade policies (and was stumped by an eight-year-old girl’s question), but no one asked him about self storage. For a real estate guy, Buffett has been uncharacteristically silent on the self storage industry. Berkshire Hathaway holds a large stake in building supplier USG Corp and single-tenant real estate investment trust (REIT), Store Capital, but he’s yet to buy self storage stock or make comments on the industry.
As a young investor, I’m always keen to hear Buffett’s comments on where to put my money, and the day that the ‘Oracle of Omaha’ makes a strong statement on self storage, you can bet I’ll blog about it! But based on Buffett’s advice to other real estate investors, we can still make some conclusions about what advice he’d have for self storage owners and investors in 2018:
Buffett is bullish on tech, both in how he runs his company and when acquiring stocks like Apple - but that wasn’t always the case. He’s stated that one of his biggest regrets is letting his own limited understanding of technology get in the way of past opportunities to invest in now big-time companies like Google and Amazon, and admits that close friend Bill Gates had to convince him to stop using the primitive Altavista search engine and switch to Google.
As the world changes and evolves, updating your technology becomes a necessity for almost all businesses, no matter how large or small. For many storage owners, dealing with the creakiness of an outdated system is just part of life, and the hassle of switching seems like more work than it’s worth. The “if it ain’t broke, don’t fix it” mentality can kick in, and it can be easy to stay stuck in the mud if you’re at all intimidated by new technology. But if you neglect to update your company’s tech, you’re crippling your brand and missing out on major revenue-boosting tools for your business. After all, your storage facility’s website offers the highest ROI of all online marketing tools, your access control system prevents theft and losses that can destroy your reputation, and your software’s usability can make or break your tenant’s online move-in experience, resulting in lost rentals and profits.
With a little research on modern technology tools for self storage, it’s not hard to get caught up and become more fluent in tech-speak to educate yourself on search engine optimization (SEO), the online rental process and benefits of autopay, and how automated facilities are saving money with technology to make smart decisions for your storage business. By reading blog posts, checking out self storage trade shows, talking to other owners and operators, and educating yourself on the latest industry tools, you’ll be better prepared to choose the right technology mix for your storage business’s needs.
Buffett famously said the quotable gem: “A good business is like a strong castle with a deep moat around it. I want sharks in the moat. I want it untouchable.” Self storage businesses certainly have the high-security look of a fortified castle, but how do you create an economic moat around your storage facility?
In Buffett’s analogy, the “castle” is your storage business and the “moat” is your competitive advantage, or what keeps rival storage facilities from winning out against your brand. Your storage business’s competitive advantage is the special sauce that insulates your business from failure and keeps competitors from taking the castle.
The best way to build a deep moat for your brand is by creating a big barrier to entry for your business. Ask yourself, what’s to stop someone else from moving in next door and doing the same thing you are? For example, to steal customers from Apple, you’d have to replicate the intimate customer connection, deep integration, modern look, and general awesomeness of their stores and products - which would be quite a feat. The moat around a top-performing storage business could be a top search engine rank combined with great customer service and an easy-to-use website - with this deep moat, a new storage brand can’t just come in overnight and build up the hundreds of links, great customer reviews, and online authority that the top-performing storage brand has. Whatever your moat may be, make it impenetrable and build on it year after year (add more sharks) so it’s impossible for new competitors to duplicate.
While on the stage at this year’s shareholder meeting, Buffett warned businesses of the worsening problem that is cyberattacks. While insurance companies have a pretty good way of predicting the probability of an earthquake happening in your neighborhood, they have no way to tell you your chances of being hacked online - or how much it will cost your business. In fact, storage owners should be more worried about cyber attacks than Buffett is, as over half of all cyber attacks are targeted at small businesses.
The best offense against cyberattacks is a good defense, and the best tech companies employ quality assurance teams and security specialists who actively hunt for ways that cyber attackers could invade the system then fortify these areas before online attackers can find them. I recently wrote a blog post about how your storage business can protect against data hackers and avoid a PR disaster where your tenants’ credit card information is spilled out online, and it’s a topic that comes up again and again on self storage discussion forums.
You can protect your customers’ data and guard against cyber attacks by ensuring your business and your technology is PCI compliant (an important step in protecting against credit card theft), limiting sensitive data storage and sharing to the bare minimum, maintaining an SSL certificate on your website, and training your team on proper data security practices. By being critical of your vendors’ security policies and frequently auditing your in-house data security measures, you can protect your business from the always-near threat of cyber attacks.
Buffett has long embraced a buy-and-hold mentality, and it translates to the way he runs Berkshire. He’s sticking with Wells Fargo despite their recent public mistakes, maintains an impossibly low employee turnover rate, and advises young investors and entrepreneurs to “say no to almost everything.” What he means by “say no” is stay focused - focus on the long-term goal by saying no to shortcuts and to things that sidetrack you from your goal.
By making long-term goals, committing to the process, and saying no over and over again to things that don’t speak to your business’s values or further your mission, you’ll be able to stick to the plan for your brand’s success and achieve the big goals you’re gunning after. Whether you’re looking to acquire a new facility or you’re renovating your buildings and restructuring your business model, think long term to guide your decision making and build the successful self storage brand you’re working toward.
Thanks for reading! If you liked this blog post, you may also like: Interview: Talking smart storage units, Tesla, internet of things tech, Mission: Impossible, and the Uberisation of self storage with Janus International Group, Competing with the REIT next door: How small storage businesses can thrive in today’s market, and Selling & marketing to the self storage consumer: How to get the biggest bang for your buck.